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9 comments

yeah, i really hope they are able to sell that C&I division to some poor sucker, that business is screwing them bad right now. rising costs, negative margins, losing market share. nothing going right there for them. .
also NBC is the stupidest thing ever, i still dont see what in the hell they think they are doing running that thing.

quarter didn't look too bad,
one intersting note though was that, as bad as things are right now, GE is aggressively positioning themselves in an increasingly conservative way (moving out of equity interests and into secured senior debt, selling consumer stuff, increasing growth of provisions etc)

indicating they still dont see the compensation for the risk in the tougher areas to be worthwhile and that they see things becoming increasingly worse and making billion dollar moves/bets to make sure they are positioned well for the future.

also, did you hear that 300bps increase in UK delinquencies mentioned on the call?!?! that does NOT bode well for Europe....

A couple of points on the spin off of the appliance and consumer lighting division.

1) They couldn't sell it for a decent price, therefore off load it on to the existing share holders!

2) There is no way that the spun off division will retain its AAA status

3) Will the new entity be able to sell itself and the rights to the GE brand? If, for example, Philips or Haier want to buy the new entity at a later date, can the GE brand be expanded to cover other products in their line up?

As you can tell, I am fearful for the share holders that will own a new entity, that will be in a worse position, than it currently is within the GE family.

Regarding the 2nd Qtr figures, there was not enough detail to ascertain how they have handled their write downs on property Etc, and no details on the latest level of default rates Etc

[quote]General Electric Co.'s second-quarter profit fell 3.9 percent, matching analysts' estimates on a per- share basis after a surprise earnings slump in the year's first three months that hurt its stock price.

Profit from continuing operations was $5.39 billion, or 54 cents a share, compared with $5.61 billion, or 54 cents, a year earlier, the Fairfield, Connecticut-based company said today in a statement. Sales rose 11 percent to $46.9 billion.

Chief Executive Officer Jeffrey Immelt is selling slower- growing units to help prop the stock, which has fallen 25 percent since a surprise drop in first-quarter profit. Earlier today he agreed to sell GE's consumer-lending operations in Japan for about $5.4 billion, one day after saying he will pursue the spinoff of GE's consumer lighting and electrical switches business in addition to the century-old appliances unit. [/quote]

I have analyzed quite a few companies where I came to the conclusion that other companies were better bets. I just didn't publish the findings on the blog. I invest my own money and it doesn't makes sense for me to be biased. My job is to make money, not to be overtly negative or positive or biased.

Great analysis of GE, but I'm still worried about the cost of rolling over the $200 B of debt that matures in 2008. For example, GE Capital had a bond maturing at May/08 with a coupon of 3.5%, another one maturing in March/32 has a coupon of 6.75% ( the yields are 3.44% and 6.67% respectively). How will the higher costs of borrowing impact the bottom line, it doesn't look pretty?

Is this the first time on the blog that a research report didnt indicate a company was overvalued. Good to see as it shows me that the Reggie's research and team isnt biased and gives each company the same once over.